9 Questions You'll Get at Holiday Parties in 2023

2. Do world events affect the stock market?

When you turn on the TV, the international news is grim. Domestic news is not much better because of tragedies like mass shootings, and there always seems to be a storm somewhere. Doesn’t all this unrest make people nervous?

Bad answer: It’s not a problem. The world is messed up, and people have gotten used to it. People don’t care anymore as long as they are making money.

Better answer: You can look at charts showing stock market performance over the past 100 years and see that although the market had its ups and down, it trudged upward. This isn’t guaranteed, but the U.S. dollar tends to be considered a safe haven in times of world distress. Money tends to flow here, going into CDs, bonds and other investments.

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3. I don’t need financial planning. It’s only common sense, isn’t it?

According to CBS, half of Americans do not think they have enough saved for retirement. One out of four baby boomers and 1 of 5 Gen Zers are also reported not to be saving any money toward retirement. They might think that financial planning is common sense, but are they doing anything about it?

Bad answer: I assume you are waiting to inherit when your parents die. Beware! Your own children might have the same retirement plan in mind.

Better answer: You are right: A lot of the principles are common sense, such as paying yourself first. Like weight loss, the actions you need to take are basic, but most people don’t take the initiative without a plan. That may be why almost 40% of Americans are obese. Having a plan, following it and having someone help by holding you to account increases your chances of success.

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4. Aren’t index funds better than owning mutual funds or managed money?

It has been said that over 20 years, fewer than 10% of actively managed funds have provided a better return than their index. It would seem that owning the index is a good strategy when the market goes up. What about when the market goes down?

Bad answer: Index funds are ideal if you are brain dead and just want to “set it and forget it.” Don’t you think you should put a little effort into planning your family’s financial future?

Better answer: Indexes go down as well as up. If an investor is also OK with riding the index down, then maybe index investing is for them. Professional management costs money, and that reduces returns. Part of professional management is respecting clients’ risk tolerance and reflecting it within their asset allocation. The goal is to capture most of the upside potential while trying to limit downside risk. Some mutual funds do it for you; they are often called balanced funds. Other times, that is one of the ways that advisors add value.

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5. I have heard that art and wine are great investments and do better than stocks. Is this true?

You can find statistics showing these collectables often perform as non-correlated assets. They are also considered hard assets, since you can handle them.

Bad answer: They might be for some classy collectors, but not for someone like you who has no taste. I noticed you have a painting of dogs playing poker and are serving box wine at your party.

Better answer: There can be a place for collectibles in a portfolio. The statistics are impressive, but the market for collectibles like art and wine is thinly traded. If you decide to sell at auction, you don’t get your cash in three days, like selling stock. The commission on buying can be 25%. There is a commission on selling too.

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6. I have old furniture in the attic. I watched “Antiques Roadshow.” How do I sell it at the prices they talk about on TV?

If you are a fan of flea markets or antique fairs, it is hard to find bargains anymore. However, you might have hidden treasures.

Bad answer: Do you know why you have old furniture in the attic? It’s because your parents and grandparents couldn’t give it away. They couldn’t sell it, either. It’s only good for firewood.

Better answer: Local auction houses often host appraisal days and give free valuations. If your items are too big to easily transport, take lots of photos. Bear in mind, when you watch TV appraisal shows, they often talk about three types of values: auction prices, retail prices and insurance value.

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7. How do I avoid taxes on stock trading?

Short-term stock trading can be fun, but the government is your silent partner. You take the risk and the tax man gets a slice, often at the same rate as ordinary income.

Bad answer: Easy. Do not bother to include it on your tax return. The government will never know. (FYI: It will.)

Better answer: You cannot avoid taxes, but you can defer them. One strategy is to trade in a tax-deferred retirement account. Another is to hold stocks longer, until the short-term gain becomes a long-term gain, taxed at a lower rate.

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8. Is Social Security going away?

This has been a consistent fear. More than 20% of the federal budget represents Social Security payments in 2023. As an FYI, 24% went toward federal health insurance programs like Medicare.

Bad answer: Probably not, because older people like you are the ones collecting it. Older people vote.

Better answer: The first thing that people should realize is that Social Security payments should be considered part of your retirement income, not a replacement for your salary. Although people talk about the Social Security Trust Fund running out sometime in the future, the government has other levers it can pull. It can tinker with the cost-of-living adjustment. It can change the rules on how it is taxed as income to retirees. I do not think anyone wants to see it disappear, because recipients have been paying into it for their working life.

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9. I have heard “there is no free lunch” in terms of investing. What does that mean?

Advisors might find clients push back on fees and commissions. They use the logic: “This ad says I can trade online for free. Why should I pay you?”

Bad answer: Wall Street can hire the best minds. As an industry, we can hide fees so deeply you will never find them. Even if we say “no fees,” know they are buried somewhere. No one on Wall Street works for nothing.

Better answer: The expression was associated with bars and saloons that put out free food but expect you to pay for drinks. Regarding investing, some online sites advertise free trading. Common sense says they must be charging you somehow, otherwise they could not stay in business.

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